March Regulatory Compliance Briefing

The March Regulatory Compliance Briefing includes advisories and pending actions and alerts to be aware of this month.

Recap of February Compliance Alerts

National Credit Union Administration (NCUA)

CA-196 NCUA Final Rule on Cyber Incident Reporting

• Rule/Action Final: February 23, 2023
• Effective Date: September 1, 2023
• Alert Date: February 23, 2023

Compliance Alerts Expected in March

To be determined

Additional Advisories and Announcements

The selected advisories and/or announcements below provide information that may be helpful to your organization but were not included as compliance alerts because they do not contain any regulatory changes.

Consumer Financial Protection Bureau (CFPB)

CFPB Proposed Rule on Credit Card Late Fees

On February 1, 2023, the CFPB issued a Proposed Rule that would make significant changes to the Reg. Z credit card late fee rules. The key proposed changes would: reduce the amount of the credit card late payment safe harbor fee to $8; eliminate the annual inflation adjustment for safe harbor late fees; and provide that late fee amounts must not exceed 25% of the required minimum payment. The proposed changes are limited to late fees at this time. The CFPB is seeking comment on whether the proposed amendments should apply to other penalty fees, such as overlimit fees and returned payments.

Federal Deposit Insurance Corporation (FDIC)

FDIC Updates to Risk Management Manual

On February 2, 2023, the FDIC announced updates to the Risk Management Manual of Examination Policies. Specifically, the FDIC has updated Section 3.6 – Other Real Estate, including revisions for relevant accounting changes related to foreclosed real estate, with a focus on seller-financed other real estate, as well as other technical edits.

Financial Institution Letter FIL 06-2023: FDIC Supervisory Approach Regarding Changes to HMDA’s Closed-End Mortgage Loan Volume Reporting Threshold

On February 3, 2023, the FDIC issued a Financial Institution Letter explaining its supervisory approach to HMDA compliance with respect to closed-end loan reporting, following the September 23, 2022 Order from the United States District Court for the District of Columbia regarding the loan-volume threshold. For closed-end mortgage data, the FDIC plans to implement a supervisory approach for FDIC-supervised institutions consistent with the CFPB’s approach. For FDIC-supervised institutions that (1) are subject to Regulation C’s other coverage requirements, and (2) originated at least 25 closed-end mortgage loans in each of the two preceding calendar years, but fewer than 100 closed-end mortgage loans in either or both of the two preceding calendar years, the FDIC does not intend to initiate enforcement actions or cite HMDA violations for failures to report closed-end mortgage loan data for 2022, 2021, or 2020.

National Credit Union Administration (NCUA)

NCUA Regulatory Alert 23-RA-01: Change to HMDA’s Closed-End Loan Reporting Threshold

On February 2, 2023, the NCUA issued a Regulatory Alert explaining its supervisory approach to HMDA compliance with respect to closed-end loan reporting, following the September 23, 2022 Order from the United States District Court for the District of Columbia regarding the loan-volume threshold. The NCUA intends to take a flexible supervisory and enforcement approach. The NCUA will not initiate enforcement actions or cite HMDA violations for failures to report closed-end mortgage loan data collected in 2022, 2021, or 2020 for credit unions that meet Regulation C’s other coverage requirements and originated at least 25 closed-end mortgage loans in each of the two preceding calendar years but fewer than 100 closed-end mortgage loans in either or both of the two preceding calendar years.

NCUA Letter to Credit Unions 23-CU-02: Expansion of Permissible CUSO Activities and Associated Risks

On February 6, 2023, the NCUA issued a Letter to Credit Unions enclosing a guidance statement to remind credit unions of the expanded opportunities to work with CUSOs and to address some of the primary related risks, following the November 2021 Final Rule. The Guidance document discusses credit risk, strategic risk, compliance risk, fair lending, UDAAP, and reputation risk.

NCUA Proposed Field of Membership Rule

On February 16, 2023, the NCUA issued a Proposed Rule that would amend its Chartering and Field of Membership Manual. The Proposed Rule would make nine changes to the Manual intended to enhance consumer access to financial services, while reducing duplicative or unnecessary paperwork and administrative requirements. The proposed changes would: revise the rules for underserved area additions and expansions, including streamlining application requirements; revise the rules for community-based field of membership, including expanding the community-based FOM affinities; and eliminate the business and marketing plan requirement for certain federally insured, state-chartered credit unions that seek to convert to a federal charter while serving the same community field of membership.

Office of the Comptroller of the Currency (OCC)

OCC Bulletin 2023-5: Home Mortgage Disclosure Act: Loan Origination Threshold Changes

On February 1, 2023, the OCC issued a Bulletin to inform banks and OCC examining personnel that the loan origination threshold for reporting HMDA data on closed-end mortgage loans has changed, following the September 23, 2022 Order from the United States District Court for the District of Columbia. The threshold for reporting is now 25 closed-end mortgage loans originated in each of the two preceding calendar years. The OCC does not intend to assess penalties for failures to report closed-end mortgage loan data on reportable transactions conducted in 2022, 2021, or 2020 for affected banks that meet Regulation C’s other coverage requirements.

U.S. Department of the Treasury (USDT)

Proposed Rule on Cancellation of Treasury Checks

On February 1, 2023, the USDT issued a Proposed Rule to amend its regulations governing the payment of checks drawn on the United States Treasury. Specifically, to prevent Treasury checks from being negotiated after cancellation by Treasury or a payment certifying agency, the Proposed Rule would require financial institutions to use the Treasury Check Verification System, or other similar authorized system, to verify that Treasury checks are both authentic and valid. The Proposed Rule would also amend the reasons for which a Federal Reserve Bank must decline payment of a Treasury check to include prior cancellation of the check.

Federal Bank Regulatory Agencies

Joint Statement on Liquidity Risks to Banking Organizations Resulting from Crypto-Asset Market Vulnerabilities

On February 23, 2023, the FDIC, FRB, and OCC issued a Joint Statement regarding the liquidity risks to banking organizations presented by certain sources of funding from crypto-asset related entities. The Joint Statement indicates that banking organizations that use certain sources of funding from crypto asset–related entities may be exposed to heightened liquidity risks due to the unpredictability of the scale and timing of deposit inflows and outflow. In light of these heightened risks, it is important for banking organizations that use certain sources of funding from crypto asset–related entities to actively monitor the liquidity risks inherent in such funding sources, and establish and maintain effective risk management practices.

Future & Pending Regulatory Actions and Compliance Alerts

Financial Crimes Enforcement Network (FinCEN)

• FinCEN Advance Notice of Proposed Rulemaking to address the vulnerability of the U.S. real estate market to money laundering and other illicit activity — public comment period ended February 14, 2022.
• FinCEN Pilot Program for SARs Sharing proposed rule — public comment period ended March 28, 2022.
• FinCEN Proposed Phase II Beneficial Ownership Rule — public comment period ended February 14, 2023.

Consumer Financial Protection Bureau (CFPB)

• CFPB Notice and Request for Comment Regarding the CFPB’s Inquiry Into Buy-Now-Pay-Later (BNPL) Providers — public comment period ended on March 25, 2022.
• CFPB Proposed Rule on Credit Card Late Fees – public comment period ends on April 3, 2023.

Federal Deposit Insurance Corporation (FDIC)

• FDIC Climate Risk Principles — public comment period ended on June 1, 2022.

National Credit Union Administration (NCUA)

• NCUA rulemaking to modernize and improve the NCUA’s investment rule and to provide regulatory relief was expected in September 2022.
• NCUA Proposed Amendments to Subordinated Debt Rule — public comment period ended on December 5, 2022.
• NCUA Proposed Amendments to FCU Bylaws related to member expulsion — public comment period ended on December 2, 2022.
• NCUA Proposed Financial Innovation Rule — public comment period ended on February 28, 2023.
• NCUA Proposed Field of Membership Rule – public comment period ends on May 30, 2023.

Joint Federal Banking Agency Proposed Rules

• OCC, NCUA, FDIC, FRB — Joint, proposed rulemaking regarding their uniform rules and procedures for administrative hearings. The public comment period ended on June 13, 2022.
• OCC, FRB, FDIC, NCUA, FHFA, and CFPB — Rulemaking to implement quality control standards for the use of automated valuation models by mortgage originators and secondary market issuers. Notice of Proposed Rulemaking was expected in October 2022.

Stay on Top of Compliance Changes

For access to the complete analysis, executive summaries, and actions needed to ensure compliance, contact us.